LINYI, CHINA – JANUARY 19: Livestreamers sell food as she live streams video on a smartphone before … [+]
Livestream shopping, or live shopping, first appeared in 2016, when Alibaba introduced it as part of Single’s Day. It was an instant success and became a perennial part of the event. Other platforms and retailers in China took note, and by 2019, livestream shopping was growing like gangbusters.
For any western shoppers uninitiated in the ways of live shopping, the easiest way to explain it is to compare it to TV home shopping, with the likes of QVC or Home Shopping Network. A host or two, or perhaps a celebrity guest, hawk a string of products where each product is featured for a limited time (but you can buy it until it’s gone). Key features of the time include demonstrations, styling examples, or actual consumer testimonials.
However, like anything you transfer from TV to digital, the opportunity for interactivity is so much greater. Live chat is a big part of the experience, where shoppers can ask questions or make requests and the host picks those up in real time to respond. When the host is an influencer with a big fan base, there’s that extra thrill of being acknowledged and it’s probably the closest thing most fans will get to having a direct conversation.
Anyone covering live shopping has to acknowledge that its start was really a case of the right opportunity in the right place at the right time. Chinese shoppers are perhaps the most “mobile-oriented” shoppers in the world. They use super apps like WeChat, which put traditional social channels, livestreaming, live chat, and commerce all on one platform. They have a big and lively influencer economy, with mobile-oriented, tech- and social-savvy people who were already pretty good at the basics of livestreaming. And shoppers were already primed to use influencers and social channels for product discovery – and used to being able to act on an impulse purchase through the tight connections between social and commerce that were already there. The only thing Alibaba added was the live element.
And Then The Pandemic Happened
Live shopping was already hitting western awareness in 2019, and it was definitely becoming more popular in China, with competitors to Alibaba’s TaoBao Live joining in the fray. One in particular will sound familiar: ByteDance, the parent company of TikTok, was making big inroads on live shopping with TikTok’s sister company, Douyin.
When US consumers were locked down and limited to either couch parkour or scrolling their social media feeds, US retailers grabbed on to live shopping with both hands. It was an experiment, it required a lot of baling wire and chewing gum, but bored consumers were interested, and for retailers, it was better than just sitting on closed stores and aging inventory.
Startups scrambled to put together platforms to more easily enable live shopping, and retailers like Amazon and Nordstrom added live channels to their sites. And investors were happy to oblige in supporting these efforts. After all, live shopping might be minuscule in the US, but if it grows like it has in China…
However, pandemic restrictions have been easing since 2021, and in this new post-pandemic world, consumers have been going back to pre-pandemic shopping habits. The US Census Bureau, in its report on 2022 retail sales, notes that eCommerce in 2022 was 14.6% of total retail sales in the US. In 2021 it was… 14.6% of total retail sales.
Coverage of livestream shopping in the west has, as a result, taken a bit of a turn. Exuberance and “what is” and “how to” guides abounded in 2021. Lots of ink was spilled analyzing what made live shopping so popular in China and how to replicate it in the west. In 2022, the coverage became “why aren’t US consumers adopting” and “are western consumers ready for live shopping.”
Putting It In Perspective
Live shopping has posted big growth gains in China, but even in the context of China’s eCommerce numbers, it’s small. In 2021, livestream shopping was $327 billion in China, reflecting 108% growth, on top of 220% growth the year before. That’s about 10% of the eCommerce market in China. It’s nothing to sneeze at, but it’s growth on, for China, small numbers. The total retail market in China is estimated to be about $6.4 trillion. That makes live shopping about 5% of the overall market. And the growth rate appears to be slowing.
In the US, live shopping was about $20 billion in 2022. eCommerce sales were just over $1 trillion, and total retail sales were about $7.1 trillion. That makes live shopping about 2% of the eCommerce market and 0.3% of the total retail market. By the way, depending on who you ask, the global TV home shopping market is $36.5 billion or $220 billion. Or somewhere in between.
The structure of the market is also very different, China vs. US. In China, TaoBao dominates with almost 80% of the live shopping market. Douyin and Kwai pretty much split the rest. In the US, it’s far more fractured. There are social media platforms who have had an on-again off-again relationship with live shopping (Meta’s most recent move was to shut down live shopping on Instagram), there is a long list of both platforms that will white label the capability onto retailers’ websites, or startups trying to be the next TaoBao or Douyin by going direct to US consumers. And then there’s Amazon.
What Is The Upper Limit of the Live Shopping Market?
Everyone investing in US live shopping tech points to China’s growth and says it’s only a matter of time before the US market reaches the same levels. But even in China, there are storm clouds on the horizon.
Douyin, the number two in the market, is already positioning for a future of stagnant growth in livestream shopping. Some in the company believe that livestream shopping will peak in the next two years, which would cap it somewhere around 20% of eCommerce sales. In the same report, a research firm found that consumers really have an upper limit to the amount of commerce they can tolerate in their livestreams – time spent on the site and overall retention start to drop if commerce makes up more than 10% of their feed. Douyin has already lowered the percent of commerce streams in its users’ feeds from 30% to 20%.
And there’s another aspect to livestream commerce that is rarely discussed. Gartner reports they’ve heard from North American retailers that conversion rates can hit up to 40% on livestream events, which is definitely enough to get retailers’ attention. But at Douyin, 80% of its sellers’ revenue typically comes from one or two products. And in some categories, like jewelry, buyers’ remorse can lead to return rates as high as 80%.
In scanning the advice on how to be successful in live shopping, or breakdowns on why it has not taken off in the US, it seems to come down to one main thing: what content appeals? Breaking that down, there are two main parts: FOMO and entertainment value.
Live Shopping FOMO
One key aspect of live shopping in China is the ability to play on consumers’ fears of missing out. The deals that are offered are only good while the product is being featured, and many streams feature countdowns or how many units are left to reinforce the idea that if you miss it, it’ll be gone. In a series of interviews with Chinese livestream shoppers, Part and Sum, a strategy consultancy, talked to one shopper who waited up almost all night for the one product she wanted to be featured so that she could get the limited-time offer on that product. In my browsing of livestreams as part of this article, I didn’t find a single stream for the US that featured a countdown, or even a limited time discount.
Another aspect of FOMO is the ability to build anticipation for an event, and US retailers have definitely not mastered this either. In China, influencers use their social reach to hype livestream events alongside the brand partners themselves. In just one example of what I found in the US, Nordstrom will feature a live event with Charlotte Tilbury, built around the Oscars. The only place I found any promotion of this event was on the Nordstrom Live part of the site. On Instagram, for example, there was no mention from Nordstrom, from Charlotte Tilbury the brand, nor from Charlotte Tilbury herself.
Mastering Shopping as Entertainment
The other important part of getting content right is the entertainment value of the time. Several analyses of live shopping’s failure to launch in the US has been pinned to the fact that it’s just plain boring. One article termed it “lacking charisma.” Another pointed out that while we all go to Amazon to shop, we don’t go there looking for anything close to shopping-based entertainment. And, while I was live shop surfing, I confess I was underwhelmed.
On Amazon, the host moved from one product to the next only to realize he had left his sample in the kitchen (and had his wife run and get it). Over five hundred people watched that, the most of any active stream on Amazon Live while I was there on a Saturday. The next most-watched stream had forty people. Another host on PopShop had a long stretch of frustrated silence – she was having some kind of technical difficulty and was trying to solve it herself because she was pretty much a one-woman show.
Outside of a few high-profile influencer personalities, you get into the long tail of who’s who really fast in the US. And it shows. Samples of Chinese livestreams I’ve seen (granted, there may be selection bias involved in what I’m able to see) show dual hosts, one focused on showing the products and one focused on moving the show along – and it’s a show, not just an hour with some guy and his collection of shot glasses on the wall behind him (yes, that actually was his background). There is production value, there’s possibly even a third person (or more) moderating the chat and keying the hosts to questions they should highlight live while directly answering the rest. It makes US live shopping look like the lowlights from the heyday of public access television.
Whether they actively livestream or just keep an endless flow of entertaining videos, US influencers have not mastered the art of how to make featuring an endless list of products engaging and entertaining. And these gaps clearly can’t be overcome easily – even TikTok, which has all of Douyin’s experience to lean on, has yet to successfully launch live shopping in any western market, and not for a lack of trying.
Finally, live shopping will always be different in the US than it is in China because from a technology perspective, we’re in two totally different places. Elon Musk has pledged to turn Twitter into a super app, but overall most tech companies have not paid much attention to their app footprint on US consumers’ phones. Google could be a super app if they wanted to – on my (Apple) phone right now I have at least five different Google apps. Amazon shopping is served via a different app than Prime streaming.
This fragmentation creates friction that makes it hard for live shopping to take off. On my laptop, clicking on a product featured in an Amazon Live stream opens a new product detail page where I follow the same kind of shopping process as if I came to the site directly. For the company who invented one-click shopping, the fact that I can’t just add a product to my cart from a livestream seems ridiculous.
The Bottom Line
If you take the potential upper limit of live shopping in China – let’s say that’s 25% just to be generous – and apply that to US market stats, the impact is worth paying attention to, but it’s nowhere near the scale of what it has achieved in China. It maxes out around $200 billion in the US based on 2022 numbers, mostly because eCom in the US is not nearly as large a percent of overall retail as it is in China.
Across global retail, that could well mean $1 trillion dollars in total sales just for livestream shopping someday, which is definitely substantial, even in the context of $25 trillion in retail sales globally. But retailers, brands, tech companies, and influencers should not discount the hard work and investment that will be required to get there. China’s success does not translate well outside of China, and for good reasons. And there is definitely risk that it becomes a costly channel – one that requires either substantial investment to capture sales, or one that comes with costly discounts and/or returns to get consumers to buy. Proceed with caution!
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